It’s mid-May and we
are truly past season. And by season, I don’t mean the one
with ornaments and trees. Season, for real estate, typically
from January to March or April, marks the biggest pool of
buyers our area sees for the whole year. Realtors and
sellers look forward to the season as their busiest sales
period and buyers expect to find their piece of Florida’s
paradise. But this year, condo sales were down by over 30
percent in the first quarter.
Florida’s new condo law
The easy answer to explain the downturn in the condo market
is high interest rates. But in my opinion that has very
little to do with it, considering many of the condo sales
here are cash transactions. Limited inventory coupled with
Florida’s new condo law, enacted last year in response to
the Champlain Towers collapse in Surfside, scared off many
potential buyers.
The law changed building safety requirements and budget
reserve funding. Buildings of three stories or more will be
required to complete a Milestone Inspection Report and a
Structural Integrity Reserve Study. The Milestone Inspection
evaluates load bearing walls, primary structural systems and
members.
The Structural Integrity Reserve Study requires that
buildings have fully funded reserves to account for anything
that has a deferred maintenance cost, including roofs, load
bearing walls, floors, foundations, fire protection,
plumbing, electrical, and waterproofing. For buildings
constructed before 1992, the deadline to complete these
reports is December of 2024.
To address these requirements, condo associations have begun
extensive building improvement projects and have levied
special assessments. These special assessments are often
inherited by new buyers. Also, many condo associations
increased their maintenance fees to protect unit owners from
huge increases by the deadline.
But, this hedge to avoid future maintenance cost increases
may not work as intended.
The real number to fully fund the reserves isn’t known yet.
The cost won’t be known until a Structural Integrity Reserve
Study is done, something that has not been done yet for most
buildings. Since buyers don’t know how much maintenance
costs will rise, they retreated from the idea of buying a
condo this year. Buyers in large part decided to wait until
the financial picture of owning a condo is more clear. And
right now, that time is Dec. 31, 2024.
If you’re a seller, you can’t hide this reality from
potential buyers. As a seller of a condo, you must be sure
to comply with the notice requirements. The recently updated
purchase contracts require sellers to give a copy of the
Milestone Inspection Report to buyers. Plus, a seller is
required to give the buyer a copy of the Association’s most
recent Structural Integrity Reserve Study or a statement
that the association has not completed one.
You might think that selling your condo in light of the new
law would be impossible, but it’s not. There were about
3,400 condos sold in Broward County in the first quarter of
2023. Inventory is still very limited and the truth is,
Florida remains at the top of the list of states to see
inbound moves.